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According to this informative book, the key to superior performance in stock picking is not to find winners, but to shun losers. Authors John Del Vecchio and Tom Jacobs, portfolio managers associated with the Motley Fool, note that from 1983 to 2007, the Russell 3000 rose by nearly 900%, yet 39% of the stocks in the index posted negative returns. Just a quarter of the stocks accounted for all of the Russell's gain.

But how to decide which stocks not to own? Answer: Avoid buying those with telltale signs of deceptive accounting. Accomplishing that feat requires healthy cynicism about companies' reported earnings. As the authors observe, managements love to "change comparisons of apples to apples to comparisons of apples to kiwis, obscuring reality and earnings quality."

Telltale signs include such classics as a pattern of perennial "one time" charges and an unrealistically high assumed rate of return on pension assets. Another red flag: a buildup of accounts receivable, measured by a ratio called "days sales outstanding." A rise in this ratio suggests that either the company has been compelled to offer more-liberal terms to attract business or that increasing numbers of customers are unable to pay.

Del Vecchio and Jacobs draw on the work of several forensic accounting luminaries, including David Tice, Eugene Comiskey, and Charles Mulford, and add some refinements of their own. One especially helpful innovation is a ranking of various types of accounting trickery in order of the degree of hazard they pose to investors.

The authors recommend avoiding certain stocks categorically.

One group to shun: companies with business models that depend on securitization. These include time-share vendors, credit-card issuers, and (at times) mortgage issuers, scores of which have lost most of their value or gone bankrupt when credit dried up.

Since a talent for picking losers should be exploited to its fullest, Del Vecchio and Jacobs discuss the advantages of selling short. They offer a solution to a frequent source of frustration for short sellers—stocks with fatally flawed business models that continue rising for years, despite being demonstrably overvalued.

Case studies presented in the book show that a stock of this sort becomes an attractive short candidate only when management begins fudging the numbers to cover up disappointing earnings. By then, the share price might already be off its peak, but plenty of downside could remain. For example, a short seller's gain on a drop to $5 from $70 (about 93%) is nearly as great as on a plunge to $5 from $100 (95%).

Do the authors' investment methods work? They report that $100 invested at the beginning of 2000 in a portfolio constructed on their earnings-quality principles grew to $281.11 (excluding dividends) by the end of 2011, versus a decline to $85.59 for the S&P 500. On an annual basis, this strategy beat the index 10 out of 12 times.

Quantitative sticklers, however, will find a way to rain on this parade. The strategy's history is comparatively short, and the annual swings in its returns are wide. So we cannot have 90% confidence (customarily the minimum threshold in such a test), that the strategy based on earnings quality is truly superior to the passive strategy of buying and holding the S&P 500. Hard-nosed quants will further quibble that the portfolio utilizes small-cap stocks, which are riskier—and therefore expected to have higher returns—than the large-caps in the S&P 500. But most investors will no doubt envy the returns reported by the authors.

Written in lively prose, What's Behind the Numbers? is not without minor flaws. Just two-thirds of the text deals with the subject to which its title refers. The remainder addresses other investment tools that supposedly mesh with accounting-related detective work. A chapter on market-timing seems at variance with the authors' advice to own value stocks for the long haul.

Also, a block of text intended for page 14 is missing in the hard copy. Might that be the Rosetta Stone that shows us how to really get behind the numbers?

Stick a Fork in It

A social history of eating

Reviewed by Joe Queenan

This delightful work by veteran food writer Bee Wilson doesn't have a central theme, besides that eating is a universal joy and that it is fascinating to see how food preparation and partaking developed.

Nor, as her subtitle implies, does Wilson deal only with the fork. Hers is more of a social history, explaining why a certain mode of cooking—or a specific implement—became dominant in one society and not another. The English became masters of roasting beef because they had lots of wood; the Chinese did not. The use of chopsticks is directly related to food scarcity. Polynesians abandoned cooking in pots because the types of food they enjoyed were easier to prepare using hot stones.

Consider the Fork: A History of How We Cook and Eat

The chapters are arranged thematically, rather than chronologically, with individual chapters for fire, the knife, measures, the kitchen, ice, and pots and pans. For whatever the reason, spoons do not get their own chapter, but do rate frequent mention.

The author explains why different nations developed different styles of cuisine, and hammers home the role of happenstance in the evolution of cooking. The microwave, for example, was invented by a scientist working on naval radar systems. Stainless steel was developed by a man trying to improve gun barrels.

The book is replete with odd and striking facts. Milk powder was invented by the Mongols, of all people. And we continue to eat smoked meat and salted fish because we like the taste, even though modern refrigeration has rendered such preservative techniques obsolete.

Then there is the little matter of the book's ostensible subject. The fork was adopted by Italians first because other nations didn't have to do battle with pasta. "We take forks for granted," Wilson writes. "But the table fork is a relatively recent invention, and it attracted scorn and laughter when it first appeared. Its image was not helped by its associations with the Devil and his pitchfork."

The sections dealing with knives, ice, and the kitchen are more interesting than the one devoted to pots and pans, which is not a shock. Also, this tome can settle arguments. For example: Did Athenians in the sixth century B.C. buy and sell snow as a food-cooling device? No. But they did in the fifth century B.C.

JOE QUEENAN's book about reading, One for the Books, was recently published by Viking.

Your Tax Dollars at Work

Feigning sustainability while relying on subsidies

Reviewed by Diana Furchtgott-Roth

If it's really is possible to "save money" and "make money" from green technology, it's only because the taxpaying community is heavily subsidizing it. The federal government spends $12 billion a year on tax breaks and outlays for renewable energy and "green" products, such as solar power and electric vehicles. And with soaring budget deficits and new-found discoveries of inexpensive natural gas, these subsidies are hard to justify.

But not for the author of Green is Good. Brian Keane is president of SmartPower, a nonprofit that receives grants from foundations such as the Pennsylvania Sustainable Development Fund, the New York Community Trust, and the Pew Charitable Trusts. SmartPower also tries to persuade people to sign up for expensive renewable energy.

Green is Good: Save Money, Make Money, and Help Your Community Profit from Clean Energy

While Keane admits that green products cost more, he calls their purchase a "values-based decision in the same way that paying extra for a pint of Ben & Jerry's or a new MacBook Pro is a values decision." But the values on which consumers base those purchases are quite different. Consumers of Ben & Jerry's ice cream think it tastes better, and buyers of MacBook Pro believe it comes with superior features to a Dell or an HP. Also, a MacBook doesn't cost several times the price of a competing product, which is generally the case with green products. Nor do customers of Ben & Jerry's or of Apple require subsidies to finance the higher cost.

Even the subsidies are of dubious value. For example, the Massachusetts Clean Energy Center, an organization supported by Keane's SmartPower, advertises "Solar Energy Prices Lower Than Traditional Energy Sources" for Boston residents. With solar installation, the average Massachusetts house will supposedly see energy bills of $73 monthly instead of $100.

Even if you accept the $27-a-month saving without challenging the source, that still comes to a yearly cash return of just $324. Then slash the price of a five-kilowatt system to an assumed $9,450 from the full price of $21,000, after deducting $11,550 in federal and state tax credits. Never mind that the $11,550 is distributed over five years.

The cash savings of $324 comes to a paltry 3.4% a year—barely enough to cover the interest rate on $9,450 of borrowed funds. And that assumes no additional costs for maintenance and repair and no return of principal. That's no way to make money or save money.

Not surprisingly, some of the green firms the author lauds have been running out of greenbacks. Abound Solar, cited by Keane, received an Energy Department loan guarantee of $400 million in December 2010. In June 2012 it went bankrupt, laying off 125 employees. Another company mentioned, MiaSolé, will be sold to China's Hanergy Holding Group for $30 million, according to Reuters, leaving investors with pennies on the dollar.

Keane praises the dozens of Spanish solar projects, "making the country one of the world's pace-setting solar ventures." That statement needs an update. The Spanish government's promise to subsidize solar projects backfired when companies rushed to invest, raising subsidy costs to unsupportable levels. In January 2012, the government ended solar and wind subsidies.

The author lauds the electric Ford Focus, which sold about 200 units in 2012. At $40,000 apiece, no one seems to want them. He even seeks to wage green war on labor-saving devices, proposing that we spend time hanging our clothes on lines rather than using dryers, thus taking direct advantage of solar energy, except when it rains. Dishwashers will surely be next to go.

Some green technology, such as solar-powered garden lighting, is popular without government subsidies. Other technology, such as electric cars and solar roof panels, cannot survive without mandates and tax credits. With domestic natural gas reserves that could last centuries, there's no reason America should subsidize expensive renewables. U.S. carbon dioxide emissions are at their lowest level in 20 years, not because of green energy, but because of the switch from coal to cheaper natural gas, which emits far less carbon per energy unit.

Brian Keane's SmartPower would be out of business without subsidies for renewable energy. So far, at least, green has been good to SmartPower, and greed even better.

DIANA FURCHTGOTT-ROTH, former chief economist of the U.S. Department of Labor, is senior fellow at the Manhattan Institute, and author of Regulating to Disaster: How Green Jobs Policies Are Damaging America's Economy.